as Reported to the national wealth, the debt of all public administrations reached 97.6% of gross domestic product.
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a year ago, few would have dared to predict. And yet. The year 2016 will end with a rise in borrowing rates French. The performance of the obligations tricolor 10 years, the OAT, is income to 0.7 %, whereas it had fallen, at the end of July, to less than 0.1 % on the secondary market – where exchange of the debt already issued. The French public debt, this amounted to 2 160,4 billion euros in the third quarter of 2016, which is 97.6% of gross domestic product (GDP), compared to 98.4 % three months earlier, a decrease of 0.9 percentage points, according to figures published by the national Institute of statistics and economic studies (Insee), Friday, December 23. While budgetary matters remain at the heart of the presidential campaign underway, the rising rate sovereign hexagonal should she worry ?
first of all, it should be placed in its context. France is in debt at a rate that is incredibly low this year : 0.37 percent on average. On the secondary market, the yield on sovereign bonds tricolor touches, just at the start of the year. In comparison, it accounted for 2.4 per cent at the beginning of 014, and exceeded 4.5 percent in the fall of 2008, in full financial crisis. This time, more than its size, it is the rapidity of the increase has come as a surprise. The rise in oil prices during the year boosted the inflation expectations on the part of investors. At the beginning of November, the election of Donald Trump, who has promised increased spending on infrastructure and protectionist measures in the United States, has accelerated the phenomenon, by a classical mechanism of contagion.
” But it is mostly back to normal. Interest rates at zero, this has no economic logic “, provides René Defossez, “strategist” [business finance, which is to identify the most probable of the financial markets at various horizons] at Natixis. In fact, in 2016, the world rate has market on the head. Sent to the mat by the measures of asset purchases, massive of the european central Bank (ECB), but also by the sluggish growth, many sovereign bonds in europe have shown yields… negative. In other words, investors were paying to borrow to the States !
Current election monitor
The phenomenon is fading now. Helped by the oil prices, the inflation should gradually edge up, to 1.4 % on average next year, compared to 0.3 % in 2016, according to M. Defossez. Starting in march, the reduction of the monthly redemptions of debt by the ECB may contribute to a slight tension of the rate. Nothing revolutionary, however. Anxious not to destabilise the markets, the ECB has drawn up a timetable very careful. In 2016, the institute of Frankfurt has acquired on the secondary market a significant portion of the debt securities tricolor issued : 126 billion euros. A true safety net, ensuring France a demand for sustainable, maintains the yield of the OAT at a low level.
This is especially the elections that will be scrutinized closely by investors. On the left, but also to the right of, the candidates at the Elysee seem to want to free themselves from the rule of a deficit of 3 % of GDP enshrined in the eu stability pact. As for the threat of a victory of populism in France, Germany or the netherlands, it brings back the spectre of a spike in rates. the ” investors worldwide do not really understand the european policy. The fears are most important after Brexit and the election of Trump “, confirms Raoul Solomon, co-head of Barclays France, one of the seventeen specialists in treasuries (SVT), these banks who advise the State on funding markets. the ” If a populist party was gaining in power, he could see the consequences for the euro zone, with a policy a little less looking on the creditworthiness of the debt. Not to mention a possible exit from the euro “, says Dr. Defossez.
sleight-of-hand policy worrying
For the next year, the prospects for French emissions vary little : Agence France Trésor, responsible for the investment of the debt, expects a financing need of $ 185 billion, compared with 187 billion in 2016. The charge (interest) of debt is estimated at 41.5 billion euros next year, with a rate ten years estimated to be 1.25 % by the end of 2017, compared to 41.6 billion this year. Indeed, to repay its old debts coming due, the State incurs new and, at a lower rate. Result : ” the past six to seven years, our interest expense declined as our debt is progressing ! “, says Gilles Carrez, president of The Republican of the finance committee of the national Assembly, which recalls that of the inverse ” a one-point increase is equivalent to 2.5 billion euros of additional interest the first year and double that the following year “.
Mr Carrez said more worried about the sleight-of-hand policies implemented to contain the debt, the image of the mechanism of the ” issuance premiums “, denounced this summer in a report of the Court of accounts : the State extends to ancient lines of debt, at rates more attractive to investors, in exchange for a premium paid by the latter to a liquid. Therefore, a recipe immediately for the State, which reduces debt in the short term… but the risk of the increase in the medium term. the ” The “issue premiums” have always existed, but they represented about 40 billion euros between 2015 and 2016, up from 7 billion in 2014 “, says Mr. Carrez. More than ever, in 2017 the debt will remain an object of political as well as financial.